Australia’s financial services and other major corporate businesses could be exposed to a significant loss of knowledge workers once Covid restrictions ease, according to one of the industry’s leading recruitment firms, with the country’s talent shortage set to ‘’worsen” not “alleviate” once international borders reopen.

After nearly four months of lockdown, ‘freedom day’ has come to New South Wales, Australia’s most populous state; Victoria, a fellow economic powerhouse, will no doubt soon follow as Covid-19 vaccination rates climb steadily. It appears Australia is finally seeing the first glimmers of light at the end of a long Covid tunnel, with governments already proposing the reopening of not just state borders but also our international border by early 2022.

While many local firms are keenly awaiting the resumption of international travel in the hope of resupplying depleted talent pools, there is a genuine concern that once the proverbial floodgates open, the pipeline will not – as many anticipate – flow into Australia but will in fact reverse course overseas.

“I actually think Australia is in a very vulnerable position to lose a significant amount of talent,” says Simone Mears, co-founder and managing director of Profusion, one of the country’s top specialist recruiters for the financial services industry.

After two years of confinement in Australia, Mears believes there is a serious risk we will see an outflow of talent, as individuals who have relocated to Australia choose to either return permanently or move back for an extended period of time to their countries of origin.

“With two years of border closure, people have missed significant personal events such as the death of loved ones, weddings, births, and illnesses. They have had no access to extended family support, no holidays; the option of getting on a plane and making a quick trip home for a major event was taken away from them.”

“Many people have put their lives on hold,” adds Sam Holliday, Profusion’s divisional director for specialist recruitment, who fears that the itch to return home is “so bad that many are willing to risk their professions”.

“Many people have put their lives on hold.”

Australia’s uniquely restrictive border lockdowns and curtailing of people movements throughout the course of the Covid crisis – which have “kept people here and made it so hard to go overseas and return back,” Mears notes – have convinced many who may have otherwise remained working in the country to leave and potentially never return.

Uncertainty around the timing of border re-openings, both state and international, have only exacerbated feelings of homesickness.

Mears urges both government and industry to offer greater incentives and targeted migration programs to lure, and indeed keep, skilled individuals across a number of high-demand job families, including ICT, risk, accounting and finance – all of which are experiencing chronic shortages.

“We need talent back in the country, and I would hope that the government is moving to proactively put programs in place to encourage people to come to Australia.”

She says government and industry cannot “rely on pre-pandemic immigration strategies” to stem the outward flow. Even conditions for Temporary Skill Shortage (TSS) visas (previously known as 457s) that were tightened considerably before the pandemic have remained unchanged, Mears notes.

Revising the “severely outdated” Australian and New Zealand Standard Classification of Occupations (ANZSCO) list, a concern flagged during a recent Parliamentary Committee inquiry, will also be critical to addressing the talent shortfall in the tech space, experts argue.

The Federal Government has shown that it can move quickly to plug staffing gaps in sectors of urgent demand, particularly in the healthcare space. Time will tell whether the Government sees similar urgency to act to stem the flow from other sectors.

The salary hike

Employers are also facing the prospect of a significant salary spike as the talent shortage crisis worsens – an estimated increase of more than 30 to 40 per cent for new recruits, Profusion says.

“I’ve got multiple examples of people getting a thirty-, forty- or even fifty-thousand-dollar increase in salary – and we’re not necessarily talking only about those at a general manager and above level.”

Within the fund management space alone, Profusion reports that some roles are seeing a 25 per cent increase over budget.

However, a similar salary bump is expected across multiple job families and “at all levels”, Mears adds.

This extends across virtually all knowledge worker roles, including senior positions in product development, marketing, sales, projects, accounting and finance, and of course in the digital and IT space, as financial services businesses’ transformation programs continue apace.

Risk and compliance roles – particularly in the wake of the Hayne Royal Commission and several compliance breaches in the AML/CTF space that have cost banks billions in remediation and penalties – are in particularly high demand, with salaries having “gone through the roof” over the last three years, Mears says.

Holliday adds that, within this risk and compliance space, “there are more roles than there are professionals in Australia.”

Daily rate contracts, he hastens to add, are also skyrocketing.

The ‘perfect storm’

The job market is “as tight as I’ve ever known it”, says Holliday. Much of this, at least on the demand side of financial services, can be attributed to the fallout from Hayne and the industry’s post-Royal Commission “clean up”.

“There’s so much work to be done to clean up shop and make sure there isn’t that repeat of the problems that, in particular, the big four banks faced.”

Hiring in the risk compliance and legal space has been “wild”, with project management and technology functions to manage requisite core systems upgrades seeing “massive demand”.

Australia’s financial services industry has been on a steady upward trajectory, up 20 per cent or around 87,000 new positions, over the last five years. In the last quarter of 2021 alone, the industry saw 35,000 new jobs created – an increase of more than 7 per cent, Australian Government figures reveal.

And yet this hiring spree is still barely keeping pace with the financial services industry’s rapid growth, which has, within just the three years to FY21, seen its market swell by $1.23 trillion (or 13.5 per cent).

“This is the perfect storm,” Mears says. Closing in on four years since the start of the Hayne inquiry, Australia’s financial services industry has hit a “convergence point”, still grappling with a litany of concerns that have only exacerbated this chronic talent shortage. For Mears, there are three concerns in particular that stand out – all of which, she notes, are inexorably linked to wider technological changes.

Firstly, remediation: the need to address legacy overhang and system siloing that have long bedevilled core systems and exacerbated problems in compliance and customer-end digital innovation.

Secondly, consolidation and convergence. With superannuation funds merging at furious pace, and banks frantically divesting themselves of their wealth and life insurance arms post-Hayne, the financial services industry has faced “transformation the likes of which we’ve never seen”, Mears says, with core technology platforms also in the front-line of major transformation initiatives.

And, lastly, the unprecedented surge in new, tech-savvy rivals, most notably fintechs, entering the market. Fintech Australia, a peak body for the sector, estimates the industry has swelled sixteen-fold in just six years, from $250 million in 2015 to $4 billion today.

With Sydney and Melbourne vying for status as Asia-Pacific’s leading fintech hub, the scrambling for knowledge worker – and, indeed, knowledge leader – talent will only increase.

Changing priorities – Why it’s no longer (just) about the money

Across her 25-year career in recruitment, experiencing many economic peak and trough cycles, Mears warns that periods of talent shortages, aligned with rapid salary increases, can seldom be addressed through a single, one-size-fits-all solution.

In many cases, it is simply a matter of organisations riding through the wave “until economic factors alleviate the pressure”.

However, the period leading up to the 2008 Global Financial Crisis (GFC) does offer some precedent for businesses battling the current talent shortage crisis, with skyrocketing pre-GFC salaries only halted with the sudden shock of the economic crash.

Organisations at the time were investing heavily in building out internal capability in a bid to reduce their costs of hiring, “working at individual levels to see how they could manage their costs of acquisition and salary”.

“At the time, there was a huge push towards things like flexibility and providing alternative and non-cash-based employee benefits,” Mears says.

The lesson emerging at the time: for employees, it is no longer just about the money. Today, this sentiment has arguably only become stronger.

Increasingly, younger recruits are seeking benefits that extend well beyond salary concerns, from the social consciousness prerogatives and values of purpose of their chosen business (‘Is the business I’m working for doing good and investing in socially progressive initiatives?’) to its mental health and wellbeing offerings.

“Particularly Generation Z, though also Gen Y to a lesser degree, will change jobs based on the values of an organisation if they don’t feel aligned, if a company doesn’t stand for something, or if it doesn’t speak up and take a stand.”

“A bank that invests in toxic mining activities, for instance, rather than embracing ‘green mining’ initiatives,” could very likely put younger employees offside, with many opting to seek out companies with more socially and environmentally conscious investment priorities.

A recent employee survey by software development giant Atlassian and PwC confirms this decisive shift in employees’ wants and demands, with more than 69 per cent of those surveyed from Australia’s corporate workforce willing to turn down a promotion in order to preserve their mental health.

Nearly three out of four surveyed employees also believe that businesses should be concerned with their social impact, expecting their chosen organisations to take action on climate change, inequality, and poverty, for instance.

Salary and financial benefits (that is, cost of living) now sit third on a list of employee priorities, behind mental health and wellbeing and – curiously for a country with a nationalised scheme like Medicare – access to health care.

The study’s authors hypothesised this priority shift may be a direct result of the Covid pandemic, which has put the “collective mental health of Australians under pressure and bought an appreciation of its fragility and importance to the fore”.

Echoing the study’s findings, Mears also points out that it is men, overwhelmingly, who appear to depend on their employer far more to provide access to mental health and wellbeing support.

“Women will find mental health support through their own networks, but men, on the whole, depend on their employer to supply this.”

Ultimately, the study augurs a significant shift in what employees are seeking from their employers, with “money no longer necessarily the top concern for individuals changing jobs”.

These demands will likely continue the trend of organisations evolving their employee value propositions, shaped around needs and priorities that extend beyond base salaries – from non-salary incentives, social programs, and workplace culture.

“It’s really going to come down to culture and how organisations develop and invest in their culture,” Mears says.

Stemming the tide

Whether Australian financial service firms can stem the tide of talent set to flock overseas and retain their current base of critical knowledge workers remains to be seen.

Beyond the whims of government and their changes to skilled migration policies, local firms’ efforts to appeal not only to increasing dollar-value demands but also to non-salary expectations around workforce flexibility, personal wellbeing and health, and their ‘values of purpose’ will not go unnoticed by prospective hires.

Yet, crucially, it may also require a change in recruitment tack from financial services firms.

Over the last decade, LinkedIn has become one of the go-to recruitment tools for businesses big and small, particularly with the prioritisation of cost-efficient direct hiring practices. However, Mears cautions that the social media giant’s power to connect to users, particularly at a personal level, is beginning to wane.

While its reach and capacity to cast a wide – even global – net remain unsurpassed, LinkedIn’s recruitment service has, she believes, “become a victim of its own success”.

“The value of a LinkedIn message has declined significantly in value.”

“LinkedIn is so big and has so much reach that they’re now generating enormous levels of revenue through advertising.

“However, people are finding that they receive so much spam in their LinkedIn inbox every day that they’re no longer paying any attention to it.”

Relating her recent experience with clients seeking new recruits, she says many are struggling to fill positions “because their major candidate acquisition tool, LinkedIn, is losing power”.

“As a tool to source passive candidates, it’s losing its intrinsic value.”

So where can talent-seekers turn?

Mears says that recruiters’ established relationships and networks go beyond “simply seeing somebody online and sending them an email”.

“It comes back to personal knowledge of the market, personal relationships, and personal networks.”

“If you get an email from LinkedIn from someone you don’t know versus a phone call from a consultant they’ve likely known for years, and someone they know and trust, they’ll listen to that person’s advice.

“That’s where the point of difference lies.”

Profusion Group delivers executive search, permanent and contract recruitment to the country’s leading superannuation funds, investment managers, insurers, banks, lenders, fintech’s, wealth managers and platforms.